Kf W Entwicklungsbank German Financial Cooperation with Mongolia

Kf. W Entwicklungsbank German Financial Cooperation with Mongolia Berlin, April 22 nd 2013 Bank aus Verantwortung

60 years of Kf. W Financing with a public mission › Promotional bank of the Federal Republic of Germany › Founded in 1948 as Kreditanstalt für Wiederaufbau › Shareholders: 80% Federal Republic, Headquarters: Frankfurt am Main Branches: Berlin, Bonn and Cologne › Representative offices: around 70 offices and representations worldwide › Balance sheet total at end 2011: EUR 494. 8 billion › Financing volume 2011: EUR 70. 4 billion › Around 4, 763 employees (2011) › Best rating: AAA/Aaa/AAA 2

A bank with a wide array of functions Domestic promotion International business We promote Germany We ensure internationalisation We promote development Business Area Mittelstandsbank Business Area Privatkundenbank Business Area Kommunalbank Business Area Export and Project Finance Promotion SMEs, business founders, start-ups Promotion construction of new housing and modernisation as well as education Financing municipal infrastructure projects and global loans Germany agency business for Federal Government Business Area Kf. W Development Bank/DEG International project and export finance Promotion of developing and transition countries Promotion of environmental and climate protection 3

Some key figures (2011) Staff (without local staff) Ongoing projects 650 2, 680 in 134 countries Disbursements 2011 EUR 3. 3 billion EUR 1. 6 billion Portfolio EUR 28. 2 billion of which Kf. W‘s own funds EUR 13. 1 billion Staff 450 Ongoing projects DEG EUR 4. 5 billion of which Kf. W‘s own funds Development Bank Commitments 2011 of which Kf. W‘s own funds 549 in 85 countries Commitments 2011 EUR 1. 2 billion Disbursement 2011 EUR 1. 1 billion Portfolio 2011 EUR 5. 6 billion EUR 2. 6 billion 4

Kf. W Development Bank and DEG Worldwide presence - over 70 representative offices Köln London Brüssel New York Rabat Bonn Moskau Berlin Kiew Frankfurt Belgrad Priština Tiflis Sarajevo Taschkent Istanbul Bishkek Podgorica Baku Dushanbe Ankara Tirana Skopje Jerewan Kabul Damaskus Al-Bireh Amman Islamabad Neu-Delhi Kairo Abu Dhabi Mexiko-Stadt Guatemala-Stadt San Salvador Ulan Bator Beijing Kathmandu Dhaka Hanoi Mumbai Tegucigalpa Dakar Managua Bamako Niamey Sanaa Ouagadougou Accra Cotonou Jaunde Bogotá Quito Juba Addis Abeba Nairobi Daressalam La Paz Lusaka Brasilia Jakarta Antananarivo Lilongwe Windhoek São Paulo Manila Phnom Phen Kampala Kigali Kinshasa Lima Bangkok Pretoria Maputo Johannesburg 5

German Financial Cooperation Products and their source of funds Financial Cooperation (FC) Budget funds (subsidies) Kf. W market funds Kf. W Regular FC grants & loans FC Development Loans Grants Concessional Loans Mixed Financing Composite Loans (IDA, Standard) Reduced Interest Loans FC Promotional Loans Flexible terms near market rates 6

German Financial Cooperation Mixed Financing Composite Reduced. Loan Interest Loan commercial terms Development Loans Promotional Loan Standard Condition IDA - Loan Grant Products and their source of funds Interest rate German Government is able to offer through Kf. W Development Bank a broad range the of tailor-made loans depending on the type of purpose, project and the conditions in the respective sector. We are able to accompany different project or program types with financing solutions that suit its capacity and needs. Concessional Terms (all except Promotional Loans) are subject to provision of subsidies from German Government. 7 7

FC development loans – brief overview Reduced interest loans Guarantee of German government Budget funds Kf. W funds Hedging of credit risk through German government guarantee lowers the interest rate for the partner considerably Risk coverage Grant Loan Kf. W Partner country Gran t red uces i the in teres t rate for th e pa rtner coun try 8 8

FC development loans – involved parties guarantee Capital market KS, PV, VA, BE, AK, SP Kf. W funds Kf. W BMZ Budget funds ECA / German government BMZ Intergovernmental agreement Payment guarantee Foreign government Loan agreement Disbursement Foreign debtor Debt service 9 9

German Cooperation with Mongolia 10

Priority Area Energy Efficiency in Grid-Based Power Supply Energy Efficiency II New Program (Bogdyn Hydropowerplant) (TPP Darkhan) (TPP IV UB) Energy Efficiency III (Transmission and Substitution) FC 6. 1 Mio. EUR under way Renewable Energy I FC 10. 5 Mio. EUR FC 8. 5 Mio. EUR Energy and Environment Darkhan (Energy efficiency in TPPs) under way planned for 2014 11

Priority Area Biodiversity Climate Change Adaptation and Preservation of Biodiversity Program Biodiversity and Adoption to Climate Change 11. 5 Mio. EUR ongoing planned for 2013 3/16/2018 12

Priority Area Energy Efficiency 13

Energy Sector Programme I (2004 – 2013) › Total Funding Volume 12. 90 million IDA-Loan › Programme Objectives Contribution to reliable DC supply in power plants and in substations during normal and emergency conditions; Contribution to reliable automatic transfer of meter data from substations and power plants into the control centre › Programme Measures including Rehabilitation of DC supply systems in substations supply of spare parts and corresponding staff training; Establishment of new AMR system in CES including data collection equipment and interfacing, spare parts supply and corresponding staff training › Target Area Central Energy System of Mongolia › Project Executing Agency National Dispatching Center; National Transmission Company 14

Renewable Energy Programme I (2006 – 2014) › Total Funding Volume 6. 10 million EUR Grant › Programme Objective Improvement of DC supply system in Uliastai based on hydropower › Programme Measures Rehabilitation of hydropowerplant Bogdyn; Rehabilitation of distribution grid Uliastai › Target Area Uliastai, Zavkhan Aimag › Project Executing Agency Ministry of Energy of Mongolia 15

Energy Efficiency Programme I (2010 – 2014) › Total Funding Volume 10. 50 million EUR IDA-Loan › Programme Objective Contribution to more efficient power supply in the city of Darkhan › Programme Measures Modernization of TPP Darkhan including expansion of turbine house, supply and installation of new 35 MW steam turbine and corresponding facilities; consultancy services › Target Area Darkhan, Selenge Aimag › Project Executing Agency Darkhan Thermal Power Plant Joint Stock Company 16

Energy Efficiency Programme II (2012 – 2015) › Total Funding Volume 8. 50 million EUR IDA-Loan › Programme Objective Improvement of energy efficiency and reliabilty of TPP IV; Reduction of specific coal consumption and specific emissions › Programme Measures Modernization of TPP IV including supply and installation of new water treatment plant, RPM-regulated power unit, pipe cleaning systems, and consultancy services › Target Area City of Ulaanbaatar › Project Executing Agency Thermal Power Plant IV 17

Outlook – Focal Area Energy Efficiency › The Federal Ministry for Economic Cooperation and Development (BMZ) is planning further commitments for investments in the Mongolian energy sector in 2013 and 2014 to be implemented through Kf. W. › 2013: up to 30 million EUR Development Loan (special funds from IKLU-facility) › 2014: up to 10 million EUR Standard Loan (regular country quota) › New projects are being developed based on investment planning of Ministry of Energy of Mongolia and on focal area Energy Efficiency strategy of German BMZ. › Use of funds envisaged for › Energy efficiency and environmental measures in Combined Heating Plants (esp. Darkhan) › Energy efficiency and supply security measures in power networks › Close cooperation between Ministry of Energy and German implementing agencies GIZ and Kf. W in project identification and preparation. 18

Priority Area Biodiversity 19

Biodiversity and Adoption to Climate Change › Total Funding Volume 11. 50 million EUR grant › Programme Objective Strenghtening of Mongolian protected area system with special regard to climate change Improvement of living conditions of local population › Programme Measures Implementation of a competition based application mechanism for › Development of key protected area infrastructure; Procurement of equipment for protected areas and regional training centres; Establishment of buffer zone funds; Support in preparation of related management plans › Target Area Mongolian Protected Areas › Project Executing Agency Ministry of Environment and Green Development 20

Outlook – Focal Area Biodiversity Steps already taken / yet to be taken: › 2012 March: 11. 5 million EUR commitment from German Government through Kf. W › 2012 November: Kf. W appraisal mission to Mongolia › 2013 April: Appraisal report submitted to German Government Next steps › Approval to be received from German Government › Draft Financing Agreement to be submitted to MED for review › Approval procedure on Mongolian side according to Mongolian regulations › Signing of Financing Agreement between Mongolia and Kf. W 21

› Programmes outside Priority Areas 22

Regional Transport Infrastructure Development To Improve Food Supply to Ulaanbaatar › Total Funding Volume 11. 50 million EUR IDA loan › Programme Objective Improvement of living conditions and income situation of local population through improved acccess to key markets, health and social facilities; Improvement of local food supply to the capital city. › Programme Measures Construction of feeder roads from Soum. Centres Bornuur, Jargalant and Batsumber to National Highway towards UB. › Target Area Mainly Tuv and Selenge Aimags › Project Executing Agency Ministry of Roads and Transport 23

Environmentally Sound City Development Ulaanbaatar Waste Water Treatment Plant in Nisekh/ Yarmag › Funds for the project committed by German Government since Government Negotiations 2008. › Project preparation currently on hold due to outstanding decision from Mongolian Government regarding financing source. › Alternative use of funds within the agreed areal framework („reprogramming“) is possible. › Respective application needs to be submitted to German side. › Final decision from Mongolian Government is expected latest during upcoming Intergovernmental Consultations. 24

Future Mongolian German Financial Cooperation Introducing of Promotional Loan Financing – also possible outside priority areas Promotional loans are a financial instrument of German Development Cooperation to close the gap between concessionary and pure commercial lending. › Financing of infrastructure or equipment in the fields of transport, energy, mineral resources, etc. › Not bound to the priority areas of cooperation; more flexible. But all projects shall have a development impact. › Borrower can be the Government, a sub-sovereign, like a municipality or a province, or a fully or partly state owned enterprise providing a state guarantee. › Promotional loans are entirely refinanced by Kf. W market funds. Pricing on the basis of Kf. W’s low funding costs (AAA rating). 25

Thank you for your attention Kf. W Bankengruppe Kf. W Office Ulaanbaatar Eva Schneider, Country Manager Sascha Stadtler, Director Tel +49 69 7431 3648 Tel +976 70115952 Mob +49 162 1070429 Mob +976 99108953 Eva. Schneider@kfw. de Sascha. Stadtler@kfw. de Bank aus Verantwortung